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Saras Sarasvathy's Full Case Study and Questions
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The following is a case study on the psychology of entrepreneurs conducted by Saras
Sarasvathy, a professor at the University of Virginia's Darden School of Business. Subjects
responded to questions that simulated the experience of launching a start-up.
By Inc. Staff
GETTY
Introduction
In the following experiment, you will solve two decision problems. These problems arise
in the context of building a new company for an imaginary product. A detailed description
of the product follows this introduction.
Although the product is imaginary, it is technically feasible and nancially viable. The
data for the problems have been obtained through realistic market research—the kind of
market research used in developing a real world business plan. So far, the entrepreneurs
who participated in this study found the project both interesting and feasible.
Before you start on the product description and the problems, I do need one act of
creative imagination on your part. I request you to put yourself in the role of the lead
entrepreneur in building this company—i.e., you have very little money of your own to start
this company, and the experience you describe above.
Description of the product:
You have created a computer game of entrepreneurship. You believe you can combine
this game with some educational material and pro les of successful entrepreneurs to
make an excellent teaching tool for entrepreneurship. Your inspiration for the product
came from several reports in the newspapers and magazines about increasing demand
for entrepreneurship education; and the fact that a curriculum involving entrepreneurship
even at the junior high or high school level induces students to learn not only business-
related topics but math and science and communication skills, as well.
The game part of the product consists of a simulated environment for starting and
running a company. There are separate sub-simulations of markets, competitors,
regulators, macroeconomic factors and a random factor for "luck." The game has a
sophisticated multi-media interface—for example, a 3D o ce where phones ring with
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messages from the market, a TV that will provide macroeconomic information when
switched on, and simulated managerial staff with whom the player (CEO) can consult in
making decisions. At the beginning of the game, the player can choose from a variety of
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businesses the type of business he/she wants to start (For example: manufacturing,
personal services, software, etc.) and has to make decisions such as which market
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segment to sell to, how many people to hire, what type of nancing to go for, etc. During
the game, the player has to make production decisions, such as how much to produce,
whether to build new warehouses or negotiate with trucking companies, etc.; marketing
decisions, such as which channels of distribution to use, which media to advertise in, and
so on; management decisions involving hiring, training, promoting, and ring of
employees, and so on. There is an accounting subroutine that tracks and computes the
implications of the various decisions for the bottom line. The simulation's responses to
the player's decisions permit a range of possible nal outcomes—from bankruptcy to a
"hockey stick."
You have taken all possible precautions regarding intellectual property. The name of your
company is Entrepreneurship, Inc. The name of the product is Venturing.
Problem 1: Identifying the market
Before we look at some market research data, please answer the following questions,
one at a time:
1. Who could be your potential customers for this product?
2. Who could be your potential competitors for this product?
3. What information would you seek about potential customers and competitors—list
questions you would want answered.
4. How will you nd out this information—what kind of market research would you do?
5. What do you think are the growth possibilities for this company?
Problem 2: Defining the market
In this problem you have to make some marketing decisions.
Based on secondary market research (published sources, etc.), you estimate that there
are three major segments who are interested in the product:
Segment Estimated total size
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Segment Estimated total size
Young adults between the ages of 15 and 25 20 Million
Adults over 25 who are curious about entrepreneurship 30 Million
Educators 200,000 institutions
The estimated dollar value of the instructional technology market is $1.7 billion. The estimated
dollar value of the interactive simulation game market is $800 million. Both are expected to grow
at a minimum rate of 20% p.a. for the next 5 years.
The following are the results of the primary (direct) market research that you have
completed.
Survey #1: Internet users were allowed to download a scaled down version (Game stops
after 15 minutes of playing) of the prototype and were asked to ll out a questionnaire.
You get 600 hits per day.
300 of them actually download the product.
You have 500 lled out questionnaires so far.
Willing to pay ($) Young Adults (%) Adults (%) Educators (%)
50-100 45 26 52
100-150 32 38 30
150-200 15 22 16
200-250 8 9 2
250-300 0 5 0
Total 100 100 100
Survey #2: The prototype was demonstrated at two Barnes & Noble and three Borders
Bookstores in Pittsburgh.
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Willing to pay ($) Young Adults (%) Adults (%) Educators (%)
50-100 51 21 65
100-150 42 49 18
150-200 7 19 10
200-250 0 8 7
250-300 0 3 0
Total 100 100 100
Survey #3: Focus Group of educators (high school and community college teachers and
administrators)
The educators who participated in the focus group nd the product exciting and useful—
but want several additions and modi cations made before they would be willing to pay a
price of over $150 for it. As it is, they would be willing to pay $50-80 and would demand a
discount on that for site licenses or bulk orders.
Both at the bookstore demo and the focus group, participants are very positive and
enthusiastic about the product. They provide you good feedback on speci c features and
also extend suggestions for improvement. But the educators are particularly keen on
going beyond the "game" aspect; they make it clear that much more development and
support would be required in trying to market the product to them. They also indicate that
there are non-pro t foundations and other funding sources interested in entrepreneurship
that might be willing to promote the product and fund its purchase by educational
institutions.
Based on all your market research, you arrive at the following cost estimates for
marketing your product.
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Internet $20,000 upfront + $500 per month thereafter
Retailers $500,000 to 1 M upfront and support services and follow-up thereafter
Mail order catalogs Relatively cheap, but ads and demos could cost $50,000 upfront
Direct selling to schools Involves recruiting and training sales representatives, except locally
Competition
None of the following four possible competitors combine a simulation game with
substantial education materials. You are unique in this respect.
Company Product Description Price per unit Sales ($)
Maxis Sim City Urban planning simulation 29.95 30 M
Microprose simulation Civilization 50.00 Civilization building 20 M
Sierra On-Line Caesar City building simulation 59.95 18 M
Future Endeavors
Treetop
Scholastic CD-ROMs of Scholastic n/a 1M
Books
(New Co. < 1 yr. old)
The game companies are making a net return of 25% on sales.
At this point, please take your time and make the following decisions: (Please continue
thinking aloud as you arrive at your decisions.)
Which market segment/segments will you sell your product to?
How will you price your product?
How will you sell to your selected market segment/segments?
Learn more at effectuation.org.
PUBLISHED ON: FEB 1, 2011
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This Is What Andrew Yang's Plan Would Mean for
Business in America
What would Yang's Freedom Dividend mean for entrepreneurship?
By Dave Kerpen Founder and CEO, Likeable Local @davekerpen
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Andrew Yang. GETTY IMAGES
Democratic presidential candidate Andrew Yang has made what he calls the "Freedom
Dividend" the key aspect of his platform. A version of universal basic income, Yang's
Freedom Dividend would give every single American a monthly stipend of $1,000. And
Yang's campaign is gaining ground: He has polled as high as 3 percent and has inspired a
legion of #YangGang fans online. As an entrepreneur himself, Yang is the founder and
longtime CEO of Venture for America, a nonpro t organization that provides a fellowship
program for top college graduates to work for two years in startups and early-stage
companies in emerging U.S. cities.
Yang isn't the rst notable person to recommend universal basic income. At a time when
automation, self-driving cars, and arti cial intelligence are expected to eliminate millions
of jobs in the next 20 years, Mark Zuckerberg, Elon Musk, and Richard Branson have all
gone on record as saying that universal basic income is a concept at least worth
exploring.
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What would Yang's plan mean for entrepreneurship and business in America? Here are
three possibilities:
1) Stimulate the economy
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According
E M A I L A D D to
R E Yang's
SS website: SIGN UP
"A Universal Basic Income at this level would permanently grow the economy by 12.56 to
13.10 percent--or about $2.5 trillion by 2025--and it would increase the labor force by 4.5
million to 4.7 million people. Putting money into people's hands and keeping it there
would be a perpetual boost and support to job growth and the economy."
Clearly, this is the potential broadest economic impact of Yang's plan on the economy,
and should it happen, it would have a massive impact on small businesses in the
country.
2) Support entrepreneurship and innovation
I have met hundreds of people who have told me they have ideas for businesses they'd
like to start but don't have the money to start. How many more people might try
entrepreneurship if they had the cushion and cash that universal basic income provides?
Facebook CEO Mark Zuckerberg said in a recent commencement speech: "We should
explore ideas like universal basic income to make sure that everyone has a cushion to try
new ideas."
3) Happier, more productive employees
Every entrepreneur knows that happier employees are more productive employees. And
yet currently, according to a Motley Fool report, a dismal 40 percent of American
employees are happy with their jobs. With more economic security from Yang's Freedom
Dividend, the 60 percent of American workers who are unhappy could actually leave their
miserable jobs and look to do the kind of work they really want, which could have a huge
positive impact on small businesses.
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To be clear, there are many critics of both universal basic income and Yang's plan. Critics
say the United States couldn't afford to do it. They say there are too many unknowns.
They say people would misspend the money.
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But when Andrew Yang, Richard Branson, Mark Zuckerberg, and Elon Musk are all saying
something,
E M A I L A D D Rwe
E S Shave a responsibility to at least listen and do the research. To SIGN
me, it
UPis
clear that among other things, universal basic income and Yang's Freedom Dividend
could have a lasting, meaningful impact on small businesses and entrepreneurship in
America.
PUBLISHED ON: JUL 31, 2019
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